Aviation Industry Updates: January 25, 2022

Four Initiatives | United’s New Flight Plan

• Over the last few years, under the leadership of Scott Kirby, the company has moved into a much more positive position. United is still facing significant challenges due to a route network that has more competitive pressures than its main competitors. But four key changes under Kirby’s leadership have righted a ship that previously was floundering at sea.

• In its third-quarter earnings release, United focused more on costs than any of its worldwide competitors. The company specifically stated it expected “2022 Casm-ex (Unit costs excluding fuel costs) to be below Casm-ex in 2019.” This focus on cost separates United in a very important way — it recognizes customers want low fares, and if it can’t profitably serve those customers, it’s in trouble. This doesn’t take away its focus on higher-paying business customers, but that travel is taking longer to return and certain aspects of that travel may not return for many years.

• In its third-quarter earnings release, United focused more on costs than any of its worldwide competitors. The company specifically stated it expected “2022 Casm-ex (Unit costs excluding fuel costs) to be below Casm-ex in 2019.” This focus on cost separates United in a very important way — it recognizes customers want low fares, and if it can’t profitably serve those customers, it’s in trouble. This doesn’t take away its focus on higher-paying business customers, but that travel is taking longer to return and certain aspects of that travel may not return for many years.

• Small regional jets have lower trip costs than bigger planes, but significantly higher costs per seat. This is because they don’t have many seats. Customer tickets are priced per seat, so if the seat cost is higher than the ticket price, the airline will lose money on that customer. United has addressed this by placing a big order for new aircraft that will replace many regional jets with larger, more seat-cost efficient Boeing 737s and Airbus A320s. This strategy will help meet its aggressive unit cost goals, but also will affect the level of frequency it can offer between their hubs and the smallest cities. Still, it moves United down a path not taken by worldwide competitors with similar revenue strategies, and in that way distinguishes the airline as more creative and innovative.

• Employees, investors and customers all like companies that think about the future, too. While focusing on costs and buying more cost-efficient planes, United has committed to buy supersonic aircraft from a company called Boom and also placed an order for smaller electric planes to replace more regional jets with a sustainable option. No one thinks these will fundamentally change United anytime soon, but in trying to create a culture of hope and belief in the future, these deals are very effective. This suggests leadership that can focus on the present but keep an eye on the future and what is changing, and this is probably the most significant change in flight plan by United.

Forbes

Combating The Pilot Shortage | Raising Pay, Lowering Requirements, and Hiring From Australia

KEY POINTS:

• Airlines are pulling out all the stops in an effort to attract talent and encourage more people to become pilots. And after decades of low pay, intense training, and furloughs, pilots are being given an opportunity to shape their own career path while getting paid more.

• Breeze Airways, the startup airline founded by David Neeleman of JetBlue Airways fame, has already raised the pay for its pilots after seven months of operations. New hire first officers flying Breeze's Embraer E190/E195 aircraft will see an 11% increase to $61 per flight hour, while first officers assigned the Airbus A220 aircraft will see a 24% increase to $68 per flight hour.

• Many airline pilots who are just starting out will no longer have to endure low wages as they work their way up the ladder. Regional airlines, often the first stop for pilots that hope to fly for major carriers, are back to offering big sign-on bonuses to new hires.

• Pilots looking to make the jump over to a major carrier will now have fewer barriers to doing so. Delta Air Lines is reducing its education requirements for prospective pilots when applying by eliminating the requirement to have a four-year college degree.

• "While we feel as strongly as ever about the importance of education, there are highly qualified candidates – people who we would want to welcome to our Delta family – who have gained more than the equivalent of a college education through years of life and leadership experience," Delta wrote in its announcement. "Making the four-year degree requirement preferred removes unintentional barriers to our Delta flight decks."

• United Airlines similarly prefers but does not require a bachelor's degree for its pilot applicants and American Airlines does not list any preference or requirement for having a degree. Independent flight schools allow pilots to earn their required licenses and ratings without the additional cost of a college education.

• Some pilot requirements are outside of an airline's control, including the required number of flight hours a pilot must possess before being hired by a passenger airline and the Federal Aviation Administration's mandatory retirement age of 65. But not all airlines are looking for pilots who intend to stay for decades.

• Breeze, for example, wants to hire older pilots who retired from the airline industry amid the pandemic, even if they only have a few years before reaching retirement age.

• "Anybody who has three years left would be great because they bring in maturity, discipline, and lots of experience," Christopher Owens, Breeze's vice president of flight operations, told Insider.

Business Insider

New Start-Up Northern Pacific Airways | Eyeing IcelandAir-Esque Strategy

KEY POINTS:

• Northern Pacific Airways introduced the livery design of its first aircraft at an event in San Bernadino, Calif. on Tuesday. The 26-year-old Boeing 757 aircraft previously operated for U.S. Airways and American Airlines and will be one of 12 757s initially planned for the commencement of services by the Anchorage, Alaska-based carrier. The airline’s parent company also operates commuter airline RAVN Alaska.

• Commenting on the livery Northern Pacific Chief Executive Officer Rob McKinney stated: “The livery design captures the Northern Pacific brand and our affection for our Alaskan home. The design echoes our airline’s values – elevated customer service, an esteemed point of view, and an innovative route strategy designed to connect passengers from east to west.”

• Mr. McKinney told those at the livery reveal that Northern Pacific currently has six of the planned 12 Boeing 757s. The aircraft was selected as they were readily available, though the Boeing 737 MAX 9 or Airbus A321XLR are on the radar for future fleet enhancement. The choice of which will be determined by what is likely to be available sooner.

• “We are looking heavily on the Asia side: Tokyo, Nagoya, Osaka and Seoul,” said Mr. McKinney. “On the U.S. side at L.A., San Francisco, Las Vegas, New York and Orlando.” However, details of routes and airports to be used were unable to be divulged by Mr. McKinney at this time because the airline “does not have the authorities from the US DOT (Department of Transportation) yet.”

• “We are still working on the exact LOPA and about 180 as the total density. As the airline is not seeking to target the typical premium class traveler.” He said that service in the top class of travel “will be fairly minimal with amenities and food and possibly enhanced internet but not lie-flat seats, touch screens or any of those types of things.”

• Northern Pacific is seeking to commence inaugural operations in Q3 of 2022 though it may be likely that this target date drifts into Q4.

Airline Geeks

Southwest Says Assigned Seats May Be in Airline’s Future

KEY POINTS:

• The airline, long known for its unique way of doing things, does not currently assign seats but instead gives passengers a boarding group and reserved boarding number when they check in. However, incoming CEO Robert Jordan, who was previously the airline's executive vice president and will officially take the reins in February, said it may be time for a change.

• "Could we one day need to take back up the assigned-seating question? I think we may have to do that," Jordan said, per Travel Weekly, adding the airline would look at the impact of seat assignments on things like turnaround time and how important it is to business travelers. "Just know this. We are committed to continuing to look at our product, making sure it's relevant."

• But Jordan added the potential move isn't something customers can expect to see in the immediate future. And as for another Southwest mainstay, Jordan said free checked bags aren't going anywhere anytime soon.

• Instead, Jordan said the airline will focus on things like providing more reliable Wi-Fi, hiring more workers (which will, in turn, mean more planes in the sky), and restoring full in-flight service.

• "We need to get back to the point where you can set your watch by the reliability of our operations," he said, adding, "It's going to take into 2023 to restore the network completely back to where we were in 2019."

Travel & Leisure

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